Call for Public Inputs: Green Climate Fund Environmental and Social Management System (ESMS)

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1 Call for Public Inputs: Green Climate Fund Environmental and Social Management System (ESMS) 1. Incheon, In decision B.07/02, paragraph (n) 1, the Board requested the Secretariat, in consultation with the Accreditation Committee and Accreditation Panel, to develop an environmental and social management system (ESMS) of the GCF. An ESMS is an overarching framework for achieving improvements in environmental and social outcomes while addressing any unintended adverse impacts in all the GCF-financed activities. As a broader operational framework, the ESMS provides an opportunity for the GCF to incorporate environmental and social considerations into its decision-making and operations in ways that not only avoid and minimize adverse risks and impacts but also identify opportunities to improve environmental and social outcomes in a systematic, coherent and transparent manner. An outline of the ESMS as contained in annex VI to decision B.07/02 describes its key elements, which include the environmental and social policy, the interim environmental and social safeguards standards and a suite of management processes and procedures, including organizational capacity and functions. 2. In November 2015, the Secretariat sought public inputs on the development of the ESMS based on the outline of ESMS contained in decision B.07/02. Following the initial submission of inputs from stakeholders, the Secretariat, in consultation with the Accreditation Committee and Accreditation Panel, drafted the ESMS outline which includes the environmental and social policy of the GCF. The draft ESMS outline and the environmental and social policy is in Annex I of this call for public inputs. Annex I of this call for public inputs summarizes the progress made and the next steps in developing the ESMS of the GCF, describes the architecture of the envisaged ESMS and presents the proposed environmental and social policy. 3. The purpose of the consultation is to solicit feedback on and recommendations to improve the proposed environmental and social policy of the GCF. The Secretariat is developing the ESMS pursuant to the mandate from the Board in decision B.07/02, paragraph (n). I. Inputs requested 4. The GCF Secretariat is pleased to invite organizations and all entities involved and interested in climate mitigation and adaptation, environmental and social safeguards and related topics, to provide inputs to the proposed environmental and social policy of the GCF. 5. In particular, inputs are welcome in relation to the following elements: Scope and principles - Adequacy of coverage and the guiding principles of the policy; Requirements and roles and responsibilities Clarity of the requirements of the policy, the roles and responsibilities of GCF and the entities, and suggestions to improve its implementation, in the context of the proposed ESMS; Gaps Identifying any other areas that may have been missed and proposing ways to fill these gaps, drawing from the experiences in policy delivery from similar institutions; 1 The compendium of decisions of the seventh meeting of the Board is available at < _Seventh_Meeting_of_the_Board 18-21_May_2014.pdf/73c cb bdd-454b52b2846b>.

2 (d) (e) Enhancing outcomes Identifying opportunities to enhance environmental and social outcomes through the policy and ESMS; and Engagement Identifying scope for further engagement of multi-stakeholders to continuously improve the policy and ESMS. II. Deadline 6. The deadline for submissions is 24 February 2017 at 23:59 Korean Standard Time. III. Submission 7. Official submission of inputs on behalf of an organization or group of organizations in Microsoft Word format should be sent via as one document with the subject line "Call for public inputs GCF ESMS Response" to: The official submission should clearly indicate: Full Name Title/Position Organization/Affiliation Contact details including telephone and address Organization s Focal Point (name, surname and position). 8. Submissions should indicate whether the inputs are provided on behalf of an organization or a group of organizations. In the case where the inputs are provided on behalf of an organization, the list of organizations should be included in the official submission of inputs. IV. Disclaimer 9. Inputs provided may be publicly disclosed, made available on the GCF s website, and/or incorporated in whole or in part in a document presented to the Board.

3 Annex I DRAFT FOR CONSULTATION Environmental and social management system

4 Table of Contents I. Background 1 II. Stakeholder inputs for the GCF environmental and social management system 1 III. Environmental and social management system Elements of an environmental and social management system Coherence with best practices 4 IV. Links with existing policies and frameworks 4 V. Environmental and social policy Overview of an environmental and social policy Description of the contents of an environmental and social policy 6 Annex I: Environmental and social policy 8

5 Background 10. In its seventh meeting, the Board requested the Secretariat to develop an environmental and social management system (ESMS) for the GCF. An ESMS is a set of management processes and procedures that would allow the GCF to identify, analyse, avoid, control and minimize the potential adverse environmental and social impacts of its activities and maximize the potential environmental and social benefits in a consistent way, and to improve the environmental and social performance of the GCF and its activities over time. An outline of the ESMS as contained in the decision describes its key elements, which include the environmental and social policy, the interim environmental and social safeguards (ESS) standards and a suite of management processes and procedures, including organizational capacity and functions. 11. This document summarizes the progress made in developing the ESMS of the GCF, describes the architecture of the envisaged ESMS and presents the proposed environmental and social policy. Stakeholder inputs for the GCF environmental and social management system 12. On 30 November 2015, the Secretariat, through a call for public inputs, invited organizations and all entities involved and interested in climate change mitigation and adaptation, GCF interim ESS standards and related topics, to provide inputs for the development of the ESMS of the GCF. Inputs to the following elements, as per the ESMS outline adopted in decision B.07/02, were requested: (d) Environmental and social policy; Environmental and social assessment and management procedures and processes, including the review of institutional capacities of entities during the accreditation process and the categorization of funding proposals by accredited entities; Monitoring and reporting (including the GCF monitoring and accountability framework for accredited entities adopted in decision B.11/10); and Organizational capacities and functions, including roles and responsibilities within the GCF and between various entities. 13. The inputs received have informed the formulation of the proposed environmental and social policy, as well as process for further developing the ESMS. Further inputs on the scope of the ESMS and the draft environmental and social policy were provided by the AC and AP in October Environmental and social management system 14. An ESMS is an overarching framework for achieving improvements in environmental and social outcomes while addressing any unintended adverse impacts in all the GCF-financed activities. As a broader operational framework, it provides an opportunity for the GCF to incorporate environmental and social considerations into its decision-making and operations in ways that not only include safeguard measures of do no harm,' but also identify opportunities to do good and improve environmental and social outcomes. An ESMS allows the GCF to integrate environmental and social considerations across various levels of decision-making and operations in a systematic, coherent and transparent manner and at three entry points: 1

6 At the facilities and operations level, in relation to the organization s operations, such as environmental and social management practices, institutional capacities and stakeholder involvement; At the project and programme level, through an environmental and social risk assessment and management framework tailored to the nature and scale of the activities and the magnitude of the environmental and social risks and impacts; and At the policy level, by establishing the process for integrating sustainability considerations into the strategies and decisions of the organization. 1.1 Elements of an environmental and social management system The structure of an ESMS should reflect the mandate of an institution, how it is organized and operated and how it intends to fulfil this mandate. In general, ESMS and the safeguards frameworks are structured with the following elements: (d) (e) An environmental and social policy that sets out the purpose and objectives, scope, principles, roles and responsibilities and general requirements to effectively manage environmental and social risks and impacts and improve performance. The policy presents the commitments of the institution and articulates the principles to which the institutions will hold itself accountable; Related policies and practices that represent the existing rules and governance frameworks of institutions. The policies and practices are expected to complement and support the ESMS. These typically include information disclosure, grievance redress mechanism, and supervision, monitoring and reporting policies. For the GCF, these would involve those cited in section IV of this document, as well as those that may still be developed that are relevant to the design and implementation of the ESMS; An environmental and social management system manual consisting of management processes, procedures and guidance, which assists an organization in implementing the environmental and social policy and the application of the ESS. The ESMS also describes the organization s institutional and governance arrangements (e.g. roles and functions) and how an organization will conduct its due diligence, screening, monitoring and reporting. For the GCF, the processes, procedures and guidance will be aligned with the contents of the ESMS as indicated in the decision by the Board; Environmental and social safeguards that identify the outcomes and operational requirements as applicable to GCF-financed activities. 1 For the GCF, this pertains to the International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability, which were adopted by the Board, as the GCF interim ESS standards. 2 In paragraph (d) of the same decision, the Board also decided that the process of developing the GCF own ESS standards, which would build on evolving best practices, should be completed within three years of the GCF becoming operational, and with inclusive multistakeholder participation; 3 Stakeholder engagement delivering meaningful and active participation of GCF stakeholders, including national designated authorities and focal points and civil society organizations. Such participation ensures that projects are implemented in a manner that recognizes and takes into account the views of the various stakeholders and affected communities, 1 GCF-financed activities may refer to GCF projects, programmes and readiness activities. 2 Decision B.07/02, paragraph. 3 Decision B.07/02, paragraph (d) 2

7 (f) (g) including vulnerable women and indigenous peoples. This also includes GCF accountability mechanisms such as the independent Redress Mechanism and the grievance mechanisms of accredited entities, which function as a forum for people who may be affected by GCF projects that do not comply with the ESMS or ESS to seek redress; Guidance and tools containing technical and administrative references for entities in implementing the environmental and social policy and ESS standards. In adopting the IFC Performance Standards on Environmental and Social Sustainability as the GCF interim ESS standards, the Board also adopted the IFC Performance Standards Guidance Notes as well as the World Bank Group s Environmental, Health, and Safety Guidelines. 4 This element also includes normative references on stakeholder engagement, including consultations, country coordination, obtaining necessary consent from indigenous peoples, and support and acceptability from local communities, vulnerable and socially excluded populations, including women. Best practice options for country coordination and multi-stakeholder engagement in developing national strategic frameworks and funding proposals are contained in annex XIV to decision B.08/10; and GCF staff, resources and organizational structure to support the effective implementation of the ESMS. Staff will have the necessary expertise in all areas covered by the ESS standards of the GCF to carry out their responsibilities. The envisaged ESMS for the GCF brings these elements together and into a coherent system of managing the environmental and social aspects of institutions and their operations. It also brings together three key interacting institutions: The GCF itself, ensuring that the proposed policy is implemented, and its objectives reached; Accredited entities, applying the GCF interim ESS standards in GCF-financed activities; and Stakeholders, including national designated authorities and focal points, civil society and communities, who provide feedback on project/programme operations and help to shape outcomes and policy discourses. The structure of the ESMS of the GCF takes note of the interrelationships among the various elements and institutions and ensures that the roles and responsibilities of the institutions are consistent with their mandates and the business model of GCF. For the GCF, the proposed architecture of the ESMS is illustrated in the figure below. 4 IFC International Finance Corporation s Guidance Notes: Performance Standards on Environmental and Social Sustainability. Available at < Document.pdf?MOD=AJPERES>; and IFC Environmental, Health, and Safety General Guidelines. Available at < %2BGeneral%2BEHS%2BGuidelines.pdf?MOD=AJPERES>. The World Bank Group s guidelines are undergoing updating. 3

8 Elements of the Green Climate Fund environmental and social management system Abbreviations: EHS = environmental, health and safety, ESMS = environmental and social management system, ESS = environmental and social safeguards, IFC = International Finance Corporation, NDAs = national designated authorities, PS = Performance Standards, WBG = World Bank Group. 1.2 Coherence with best practices The outline of the proposed ESMS of the GCF draws coherence in terms of structure with the safeguards frameworks of other international finance institutions and multilateral development banks (MDBs). The elements of the ESMS will be organized to reflect the best practices in safeguards and sustainability frameworks of MDBs, which typically consist of an overall policy, set of standards, management procedures and processes, guidance and references, and methods of disclosure. In addition to the coherence of the ESMS with the safeguards and sustainability frameworks, the elements of the ESMS will also be consistent with the continual improvement process and specifications of internationally accepted environmental and quality management systems. The ESMS elements will correspond to the continual improvement model of Plan-Do-Check-Act found in management system standards such as the ISO and the European Union Eco-Management and Audit Scheme. Most of the elements of what is envisaged as the ESMS of the GCF are already established vis-à-vis the existing relevant policies and frameworks, the GCF interim ESS standards, and the technical and normative references such as the IFC guidance notes and practices on stakeholder engagement. Completing the architecture of the ESMS of the GCF will entail adopting an overarching environmental and social policy and developing a manual for the ESMS. Links with existing policies and frameworks For an ESMS to be effective as a broad operational framework, it must be able to harness the resources and existing policies of an organization. For GCF, the elements of an ESMS will need to be linked and implemented in a manner consistent with the following existing governance framework and policies, which are described in the context of the GCF interim ESS standards and ESMS requirements: 4

9 (d) (e) (f) (g) Accreditation framework. In line with the initial guiding framework for the GCF accreditation process, 5 the accreditation considers the capacity, competency and track record of entities in applying the GCF interim ESS standards as reflected in their ESMS. The assessment underpins the fit-for-purpose approach to accreditation and the scaled riskbased deployment of the GCF interim ESS standards in GCF-financed activities; 6 Results management framework. The results of the adaptation and mitigation actions at the strategic, programme and project levels are considered as potential co-effects from the implementation of the ESMS and the application of the GCF interim ESS standards. In managing risks and adverse impacts, the environmental and social outcomes of activities enhance the achievement of results; 7 Economic and financial feasibility analysis. The project s economic and financial feasibility analyses consider the expenses and savings from the environmental and social risk mitigation and management processes. It does so in a timely and integrated manner; Monitoring and accountability framework. The framework provides the monitoring and reporting requirements both at the accredited entities institutional level (accreditation) and for GCF-financed activities. 8 The framework covers the compliance performance and reporting requirements for the ESS standards of the GCF, which will be consistent with the requirements of the ESMS; Evaluation policy and Independent Evaluation Unit. Through the GCF evaluation policy and the Independent Evaluation Unit, evaluations may be undertaken regarding the effectiveness of implementing the GCF interim ESS standards; Information disclosure policy. The policy supports the commitments of the GCF to transparency and accountability in all aspects of its operations and to strengthening public trust. 9 The policy promotes effective and meaningful stakeholder engagement by making available to the affected communities and the public timely, understandable, relevant and accessible information on the environmental and social risks and impacts as well as the benefits of GCF-financed activities (e.g. information related to environmental and social reports). There are varying advance disclosure timelines depending on the project s environmental and social risk category; for example, at least 120 days in advance of the accredited entity s or Board s decision, whichever is earlier, for category A/intermediation 1 activities and at least 30 days for category B/intermediation 2. The policy also stipulates that the reports be available in both English and the local language; Risk management framework, guidelines and register. The initial risk management framework, and subsequent risk and investment guidelines for the public and private sectors and the detailed risk register 10 apply to the operations of the GCF. 11, 12 The risk register identifies risk categories that are triggered by a failure in the application and practice of the GCF interim ESS standards by the executing entities or a failure of oversight by accredited entities of executing entities on conformance to the GCF interim ESS standards, among other GCF standards. The risk register also acknowledges the role of the GCF interim ESS standards in mitigating risks particularly related to the failure of entities to comply with applicable laws; 5 Decision B.07/02, annex I 6 Decision B.08/03, annex I 7 Decisions B.07/04 and B.08/08 8 Decision B.11/10. 9 Decision B.12/ Decision B.12/ Decision B.13/36, annexes VIII and IX. 12 Decision B.12/34. 5

10 (h) (i) Independent Redress Mechanism. This independent mechanism was mandated under the Governing Instrument for the GCF to redress the grievances and complaints of communities and people. 13 The mechanism provides the GCF with a process for receiving complaints and issues from affected communities on environmental and social impacts that result from an action or an omission to follow GCF operational policies and procedures regarding the GCF interim ESS standards; and Gender policy and action plan. The gender policy and action plan details the commitment of the GCF to efficiently contribute to gender equality and ultimately bring about greater and more sustainable climate change results, outcomes and impacts. 14 The GCF gender policy and action plan complements the requirements of the GCF interim ESS standards, particularly in enhancing social access to development benefits and addressing potential social risks and impacts related to gender responsiveness and inclusiveness. Environmental and social policy 1.3 Overview of an environmental and social policy An essential element of an ESMS is the environmental and social policy which elaborates the commitments of an institution to integrate environmental and social issues into its functions and outcomes, and establishes the responsibilities and requirements to deliver on these commitments. Specifically, the proposed policy of the GCF aims to: (d) Provide a coherent, consistent, accountable and transparent approach that will improve outcomes, manage risks and impacts, and enhance access to benefits from all GCF-financed activities; Support the decision-making of the GCF by ensuring that environmental and social considerations are mainstreamed into all of its functions and mandates (e.g. accreditation of entities, readiness and preparatory support and the general project cycle of approval, implementation and review); Underpin the development of an ESMS that integrates a systematic approach to assessing, managing and monitoring the environmental and social performance of the operations of the GCF and those of the accredited entities and other development institutions with which it is associated; and Define the responsibilities and processes to deliver on the commitments of the GCF. 1.4 Description of the contents of an environmental and social policy The organization and contents of the proposed policy closely follow similar policies and reflect the lessons learned and experiences of institutions in implementing safeguards and mainstreaming sustainability actions: Policy objectives. This section of the proposed policy identifies what the policy intends to achieve and aligns the objectives with the institutional mandate of the GCF, as well as the objectives of other relevant policies and governance frameworks such as those discussed in section IV of this document. It also highlights the policy as an overarching framework that 13 Decision B.06/09, annex V. 14 Decision B.09/11, annexes XIII and XIV. 6

11 (d) (e) (f) (g) (h) ensures institutional consistency and coherence in managing risks and impacts by linking to the other relevant policies and practices of the GCF; Scope of application. This clarifies the applicability of the commitments outlined in the policy; Guiding principles. This section describes the principles adhered to by the GCF that will guide it in achieving the objectives of the proposed policy. These principles include those described in the Governing Instrument, the environmental and social objectives and those elaborated in the GCF interim ESS standards and the other relevant policies of the GCF; Overview of roles and responsibilities. This section describes the roles, responsibilities and the institutional arrangements between the GCF, accredited entities and other stakeholders in achieving the objectives and requirements of the proposed policy. Where additional parties will be involved, their respective roles and responsibilities will be described in the ESMS manual to be developed in alignment with the policy and the GCF interim ESS standards; General requirements for environmental and social risk management. This section describes the requirements of the proposed policy and how the GCF intends to achieve the objectives of the policy. Given the business model and the project cycle of the GCF, the identified requirements include those associated with accreditation, screening, due diligence, assessment, management planning, monitoring and reporting. These processes are expected to contribute to achieving the objectives of the proposed environmental and social policy; Information disclosure, stakeholder engagement and grievance redress mechanism. The requirements for ensuring transparent, consistent and meaningful participation of stakeholders are discussed in this section. These requirements are linked to the GCF information disclosure policy, as well as the options and best practices for multi-stakeholder engagement and the independent Redress Mechanism; Implementation and resource provision. This section describes the implementation of the policy through the ESMS and the GCF resources to support the implementation; and Effective date and review. This section defines the effective date and the review of the policy. 7

12 Annex I: Environmental and social policy I. Introduction and context 1. The GCF is an operating entity of the Financial Mechanism of the United Nations Framework Convention on Climate Change (UNFCCC), with the role of mobilizing long-term climate financing for developing countries. The Governing Instrument for the GCF mandates the GCF to promote the paradigm shift towards low-emission and climate-resilient development pathways in the context of sustainable development. 2. The global community is confronted with the task of addressing climate change while at the same time ensuring the well-being of people and ecosystems. To support this, the GCF strives to maximize the impact of its funding for mitigation and adaptation, and seeks a balance between the two, while promoting environmental, social, economic and development co-benefits. Taking into consideration the sustainable development context in its mandate, the GCF ensures that adequate safeguards are integrated into its operations and access to benefits from supported activities are enhanced. This integration of safeguards translates into an opportunity for the GCF to support projects and undertake activities that do not harm the already fragile environment and vulnerable people while maximizing development outcomes. 3. The GCF is establishing an environmental and social management system (ESMS) to ensure that mechanisms are in place to assist the GCF in incorporating environmental and social considerations into its decision-making while working towards the goals of climate change mitigation and adaptation. An ESMS is a collection of policies, standards, management processes and procedures that allow an organization to examine, control, eliminate and reduce the adverse environmental and social impacts of its activities in a consistent way and to improve outcomes over time. These elements of the ESMS will be integrated with other business processes and governance frameworks and will be utilized across the organization of the GCF. The ESMS will be an evolving management system that will continue to mature as the GCF s operations develop. The figure below illustrates how the various ESMS parts relate to and support each other. 4. The GCF adopted the International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability as its interim environmental and social safeguards (ESS) standards, which is an element of the ESMS. 16 The ESS standards identify the key environmental and social outcomes and their technical and procedural requirements for GCF-financed activities, as well as environmental and social issues needing particular attention The GCF intends to establish an overarching environmental and social policy that organizes the existing policies and practices of the GCF into a coherent framework. The policy articulates the integration of environmental and social considerations into the wide-ranging actions to address climate change that are financed by the GCF. This document presents the proposed environmental and social policy of the GCF. 16 Decision B.07/02, paragraph. 17 Until the GCF develops and adopts its own ESS standards, the ESS standards referred to in this document are the interim ESS standards of the GCF. 8

13 Elements of the Green Climate Fund environmental and social management system Abbreviations: EHS = environmental, health and safety, ESMS = environmental and social management system, ESS = environmental and social safeguards, IFC = International Finance Corporation, NDAs = national designated authorities, PS = Performance Standards, WBG = World Bank Group. II. Environmental and social policy 2.1 Policy objectives 6. The GCF will ensure that, in carrying out its mandate of mobilizing resources to support climate actions in developing countries, it will effectively manage environmental and social risks and impacts and improve performance. The policy presents the commitments of the GCF and articulates the principles to which the GCF will hold itself accountable. Through this policy, the GCF will ensure that all its activities and the projects that it supports will seek to: Avoid and mitigate the adverse impacts on people and the environment; Provide access to development benefits; and Give due consideration to vulnerable populations. 7. The policy articulates the commitments of the GCF with regard to sustainable development, elaborates its intention to integrate environmental and social issues into its processes and activities, and sets the roles and responsibilities, including the requirement to deliver on these commitments. The policy defines how the GCF will manage the environmental and social risks and impacts and support the overall sustainability of its operations and investments. Specifically, the policy aims to: (h) Provide the basis for a coherent, consistent and transparent management system founded on the principles of sustainable development, for improving performance and outcomes, managing 9

14 (i) (j) (k) risks and impacts, and enhancing access to benefits for project-affected people in all GCFfinanced activities; Support the decision-making of the GCF, particularly regarding the accreditation of entities, the provision of support and the approval, implementation and review of GCF-financed activities; Underpin the development of an ESMS that integrates a systematic approach to managing environmental and social performance into the operations of the GCF and those of the accredited entities and other development institutions with which it is associated; and Define the responsibilities and processes to deliver on the commitments of the GCF. 2.2 Scope of application 8. The policy will apply to all prospective and approved GCF-financed activities and to both public and private sector entities. Activities supported by the GCF include projects and programmes, and other activities, and thus include a wide range of investment and readiness and preparatory support activities. The financial instruments may vary and may include grants, concessional loans, guarantees and equity investments. The policy applies to three engagement areas: At the strategic and institutional level, the policy responds to the mandate expressed in the Governing Instrument and links to other operational strategies and policies, including internal structures and governance frameworks of the GCF; At the entities and intermediaries level, the policy sets out the requirements for accredited entities working with the GCF to establish and maintain robust, systematic, accountable, participatory and transparent systems to manage the risks and impacts arising from GCFfinanced activities in a manner consistent with the policy and the ESS standards adopted by the GCF. These requirements complement the accreditation framework and will also be considered in the accreditation and re-accreditation processes; and At the project level, the policy establishes the requirements for environmental and social risk assessment and management aligned to the ESS standards of the GCF ensuring that due diligence is undertaken for all GCF-financed activities, regardless of whether these are solely supported by the GCF or co-financed by other development organizations. 9. Where activities are co-financed by other institutions, the GCF will encourage accredited entities and the co-financing institutions to explore a common approach for the assessment and management of the environmental and social risks and impacts. The GCF can agree to a common approach, provided that such a common approach is consistent with this policy and the ESS standards of the GCF and will achieve the same level of environmental and social protection as this policy. 10. Additional country requirements on environmental and social safeguards and sustainability may be integrated with the requirements of the GCF provided that the entities establish the consistency of the additional requirements with this policy and the ESS standards of the GCF. III. Guiding principles 11. The guiding principles setting out how the GCF will achieve the objectives of the policy will be as follows: 10

15 (d) (e) (f) (g) Integration of environmental and social sustainability. Sustainable development underpins the mandate and objectives of the GCF and hence is a key consideration in the policies and governance frameworks of the GCF. Within the parameters of the ESMS, this is translated into the operations of the GCF such as accreditation, investment criteria, ESS application, monitoring and accountability, information disclosure, gender mainstreaming and the independent Redress Mechanism; Scaled risk-based approach. 18 The ESS will be implemented using a risk-based approach rather than a simple one-size-fits-all approach. This will ensure that environmental and social requirements and processes are commensurate with their level of risk and coupled with a focus on the relevant ESS standards; Fit-for-purpose approach. 19 In the context of the GCF accreditation process, the approach recognizes the roles of a wide range of entities, which can differ according to the scope and nature of their activities, and their capacity to manage environmental and social risks and impacts. The GCF enables entities to access various levels of support differentiated by their capacities in meeting fiduciary and environmental and social safeguards requirements; Mitigation hierarchy. The GCF adheres to the mitigation hierarchy as an overall principle to managing environmental risks and impacts. The mitigation hierarchy aims to: (i) (ii) (iii) (iv) Avoid adverse risks and impacts on people and the environment; Ensure that, where avoidance is not possible, adverse risks and impacts are minimized through abatement measures; Mitigate through measures to remedy adverse impacts; and Where avoidance, minimization or mitigation measures are not available or sufficient, design and implement measures that compensate for or offset any residual risks and impacts; Coherence and links with relevant policies and practices of the GCF. 20 The GCF environmental and social policy is an overarching policy that will be consistent and linked with the relevant policies and practices of the GCF such as those related to accreditation, monitoring and accountability, the independent Redress Mechanism, information disclosure, gender policy and others as appropriate; Continuous improvement and best practices. 21 The ESMS of the GCF will be continuously updated to sustain their relevance and responsiveness to the prevailing organizational, social, economic and political conditions. It will also be consistently aligned with international best practices and applicable standards and reflect the experiences and lessons learned by other relevant institutions as well as on its own; Stakeholder engagement and disclosure. The ESMS of the GCF ensures that there is broad multistakeholder support and participation in planning and implementing GCF -financed activities, including measures to manage environmental and social risks and impacts. The process to build 18 Decision B.07/02, annex I. 19 Decision B.07/02, paragraph (j), and decision B.08/02, paragraph. 20 Decision B.07/02, paragraph (n), and annex VI. 21 Decision B.07/02, paragraph (n), and annex VI, requiring the ESMS of the GCF to be consistent with accepted evolving international systems for quality and environmental management systems. 11

16 (h) (i) (j) (k) (l) support will be inclusive, gender-responsive, culturally appropriate and supported by the disclosure of relevant information; 22 Gender-sensitive approach. 23 The GCF will contribute to gender equality and inclusiveness by ensuring that the methods and tools to promote gender equality and reduce gender disparities in climate actions are established and implemented. The gender policy adopted by the GCF complements the intent for social inclusion of the environmental and social policy and the ESS standards; Knowledge-sharing to improve performance. The GCF will lead and promote the sharing of lessons learned and experiences in applying ESS and in implementing ESMS among entities and stakeholders and integrate, where applicable, with the capacity development, communications and outreach activities of the GCF and the entities; Harmonized application of environmental and social requirements. The GCF will promote the harmonized application of environmental and social requirements with co-financing institutions to reduce multiple and overlapping requirements for entities, through the development of common approaches that maintain GCF standards and achieve the same level of environmental and social protection; Compliance with applicable laws. The GCF will not support projects that do not comply with applicable laws, including national laws and obligations of the country directly applicable to the project under relevant international treaties and agreements; and Consistency with UNFCCC REDD-plus safeguards. The environmental and social requirements of the GCF will be consistent with the guidance and safeguards for policy approaches and positive incentives on issues related to REDD-plus In addition to the guiding principles for implementing the policy, the GCF adheres to the underlying principles and objectives of its ESS standards. These embody the generally accepted principles related to assessing and managing environmental risks and impacts. The GCF will seek to ensure that GCF-financed activities conform to these principles, as may be relevant, as well as those pertaining to environmental and social issues requiring particular attention, as follows: Labour and working conditions. All activities financed by the GCF will promote fair treatment, non-discrimination and equal opportunities for workers and will meet the requirements of the core labour standards as set by the International Labour Organization; Indigenous peoples. All GCF-financed activities will aim to avoid adverse impacts on indigenous peoples, promote benefits and opportunities, foster respect for the culture and the people, and preserve the indigenous culture, knowledge and practices, and will support the full and effective participation of indigenous peoples. The design and implementation of activities will be consistent with the rights and commitments set forth in the United Nations Declaration on the Rights of Indigenous Peoples, including the principle of free, prior and informed consent; Human rights. All activities supported by the GCF will be designed and implemented in a manner that will promote universal respect for, and observance of, human rights for all. Actions to support human rights will be consistent with the principles contained in the Universal Declaration of Human Rights. The GCF will require entities to ensure that the supported 22 Decision B.12/35, paragraph, annex XXIX. 23 Decision B.09/11, paragraphs (a b). 24 UNFCCC decision 1/CP

17 (d) activities do not cause, promote, contribute to, perpetuate or exacerbate human rights violations; and Biodiversity. All GCF-financed activities will be designed and implemented in a manner that will protect critical habitat, biodiversity and ecosystem services. Compensation, or offsets, should be used to mitigate adverse impacts on critical habitats in rare cases and only as a last resort when: (i) (ii) (iii) All other technically feasible avoidance, minimization and restoration measures have been considered; They are supported by rigorous, sound science; and Long-term management and financing is secure. IV. Overview of roles and responsibilities Overview of the roles and responsibilities of the GCF 13. Accreditation. In relation to the accreditation of entities, the GCF is responsible for determining the capacity of the entities to manage environmental and social risks and impacts of GCF-financed activities. Where capacities exist, the GCF will assess the consistency of the system and approach used by the entities and intermediaries with GCF environmental and social standards. On the other hand, where the capacities are constrained, the GCF will collaborate with the entities on measures to improve capacities, including the deployment of necessary support and assistance through the GCF Readiness and Preparatory Support Programme. 14. Managing environmental and social risks throughout the project cycle. Within the parameters of GCF-financed activities, the GCF is responsible for: (d) Requiring the accredited entities to implement their ESMS, thereby providing for a systematic, consistent and transparent management of risks and impacts of GCF-financed activities. Where gaps or weaknesses exist, the GCF will require that these be addressed by the entities in a manner and time amenable to the GCF and the entities so that an effective ESMS is in place before GCF-financed activities are implemented; Requiring an appropriate screening and categorization process within the ESMS; Conducting environmental and social due diligence on activities proposed for funding consideration, and recommending to the Board for GCF financing only those proposed activities with satisfactory approaches to managing environmental and social risks and impacts, consistent with the ESS standards of the GCF; Requiring that environmental and social risks and impacts assessments for an accredited entity s activities are adequate and provide sufficient information to (i) assess whether the GCF should consider funding the project or programme, or not finance it because of the potential risks and impacts and (ii) determine suitable avoidance, mitigation or compensation measures, in those cases where proceeding with funding consideration is appropriate. Where gaps or weaknesses exist, the GCF will require that they be addressed. The assessments will also provide the basis 25 These roles and responsibilities are further elaborated in the remaining sections of the policy. 13

18 (e) (f) (g) for the GCF to confirm the risk categories of activities in line with the definition of the ESS standards of the GCF and the level of risks to which the entity was accredited; Confirming with accredited entities the environmental and social management plans (ESMPs) to address the identified risks and impacts and any other safeguards, instruments and tools that may be required, and reviewing their adequacy. Where there are gaps or weaknesses, the GCF will require that they be addressed. The GCF will also require that accredited entities implement (which may include the role of an executing entity), or monitor and supervise (as an intermediary) the project s implementation and compliance with the environmental and social obligations and conditions, and require that any gaps or weaknesses be addressed; Reviewing proposed operational changes and require additional measures, if necessary; and Carry out monitoring and reporting functions related to the environmental and social performance of accredited entities and the supported projects, as may be required consistent with the monitoring and accountability framework for accredited entities (MAF); 15. Information disclosure, stakeholder engagement and grievance redress. The GCF is responsible for: Confirming that the project-affected persons and communities are consulted by the accredited entities or through the executing entities during the design and implementation of the activities and that effective grievance redress mechanisms to receive complaints and feedbacks are established and function in a collaborative and manner complementary to the independent Redress Mechanism, and requiring that any gaps or weaknesses be addressed; Ensuring that accredited entities agree to fully implement remedial actions stipulated by the Board on the recommendation of the independent Redress Mechanism in response to complaints it has received and in accordance with the terms of reference, guidelines and procedures of the independent Redress Mechanism; and Confirming that all information related to the environmental and social risks and impacts of activities are appropriately disclosed to meet the requirements of the information disclosure policy of the GCF, and working with entities to address any gaps or weaknesses. 16. The GCF will require accredited entities to comply with their environmental and social obligations, including those specified in the project safeguards plans and frameworks, applicable country laws and regulations, and the obligations of the country directly applicable to the project under relevant international treaties and agreements. Where the accredited entities fail to comply with the safeguards requirements, the GCF will work with them to develop and implement corrective actions that will bring the activities back into compliance. Where the accredited entities fail to re-establish compliance within a time frame and manner that are mutually agreed upon, the GCF may exercise its remedies under its legal agreement with the entities. 4.2 Overview of roles and responsibilities of the accredited entities 17. Accredited entities are responsible for: In the case of activities proposed for GCF financing: (i) Implementing an ESMS to manage the environmental and social risks and impacts of activities, appropriate to their role as an implementing entity (which may include a project execution role), an intermediary entity, or both, maintaining or improving on the ESMS on which their accreditation was approved; 14

19 (ii) (iii) (iv) (v) (vi) Ensuring that activities proposed for GCF financing are properly screened and assigned to appropriate environmental and social risk categories; Cooperating with the GCF in the due diligence of the activities proposed for GCF financing; Ensuring that the environmental and social risks and impacts of activities proposed for GCF financing are assessed; Ensuring that measures to avoid, minimize, mitigate and offset adverse impacts are planned for activities proposed for GCF financing; and Ensuring that remedial actions stipulated by the Board on the recommendation of the independent Redress Mechanism in response to a complaint from project-affected people are respected and promptly implemented; and In the case of GCF-financed activities: (i) (ii) (iii) (iv) Ensuring that ESMPs are implemented, with operational changes as needed; Monitoring the environmental and social performance of GCF-financed activities; Disclosing information and developing and implementing a stakeholder engagement plan, including entity-level and project-level grievance mechanisms; and Reporting the progress and performance to the GCF and its stakeholders throughout the implementation of the GCF-financed activities, in accordance with the MAF. 18. The accredited entities will confirm that the measures to manage environmental and social risks and impacts, including, as relevant, information disclosure, stakeholder engagement and grievance redress, are included in the agreements with executing entities such as tendering documents and contracts. 19. The accredited entities are responsible for compliance with all applicable laws, including the laws, regulations and standards of the country in which the projects are located, and obligations of the country directly applicable to the project under relevant international treaties and agreements. 20. Entities that are functioning as financial intermediaries are exposed to environmental and social risk through the activities of their borrower and investees. Intermediaries are responsible for managing the environmental and social risks associated with the supported activities. The intermediaries will review the activities to identify where the entities and the GCF could be exposed to potential risks and take necessary action, including the development and operation of an ESMS to oversee and manage these risks. 21. The accredited entities will be responsible for ensuring that the project-affected communities and vulnerable populations are properly consulted on the risks and anticipated impacts and the expected benefits that can be derived from the projects. In order to ensure meaningful and effective consultation and participation of the affected communities and vulnerable populations, the accredited entities will disclose and make publicly available relevant information on the project in accordance with the requirements of the information disclosure policy of the GCF and subsection 6.1 of this policy. V. General requirements for environmental and social risk management 15